CSX DISTRIBUTION ADOPTING NEW RATE STRUCTURE FOR GRAIN

CSX DISTRIBUTION ADOPTING NEW RATE STRUCTURE FOR GRAIN

CSX Distribution Services, the sales and marketing unit of CSX Transportation, will change its short-haul freight rate structure this summer to a 300-mile block rate, a company official said.

Len Kellermann, CSX director of grain marketing, said the big Eastern railroad will combine three tariffs that now cover grain and soybeans within and between different geographic regions. A single tariff will cover all territory east of the Mississippi River, he said.The decision does not mean the Jacksonville, Fla.-based company, a unit of

CSX Corp., intends to exit the short-haul routes of its Eastern rail market completely, Mr. Kellermann said.

"We want to be handling the markets profitably in those corridors and to improve the profitability of our covered hopper car fleet," Mr. Kellermann said.

The decision will level freight rates for various agricultural commodities within a 300-mile radius of designated "demand centers," he said.

Under this structure, for example, shippers will pay the same rate to ship grain or soybeans one mile as they would to ship it 300 miles from that same point.

Mr. Kellermann said the principal thrust is to manage the grain car fleet more effectively. The new rate structure may discourage shippers from tying up expensive railcars for short hauls.

During slack shipping periods, the carrier might "market its cars elsewhere" to other railroads with car shortages. If it can gain higher revenue that way than in short-haul service on its own lines, tariffs will remain high. When cars are in surplus, however, it might be beneficial to vary

from the tariffs to keep cars in use.

Shippers that want to use rail for short distances will be free in most cases to provide their own cars. CSX has a liberal policy on access of private cars to its tracks.

The new structure will not be implemented until the summer because it will take time to calculate the many different tariffs that must be determined, Mr. Kellermann said.

He said there will be special circumstances when rate determinations will be able to deviate from the established tariffs, but details are still being decided. Mr. Kellermann said contracts for individual movements or multiple movements in specific corridors may be one way to deal with shipper needs.

Tariffs previously have been based on a per-mile rate, but that has proven to be unprofitable in short-haul markets, he said. CSX chose to restructure its rates in a way that will keep its short-haul corridors open, but not at the expense of the long-haul markets, he added.